I've always been under the impression that when you sell capital assets purchased under the Flat Rate Scheme you account for VAT on the sale outside the FRS (assuming it was a qualifying asset over £2k and you were able to claim back VAT on the initial purchase). The FRS% doesn't get applied to the proceeds, it's just accounted for as a "normal" sale at 20%.
However, I saw an article yesterday from my training provider that says actually if you purchased the capital asset while already IN the Flat Rate Scheme then when you sell it you just include it in your Flat Rate turnover and apply the relevant %. It then states that if you purchased the asset PRIOR to joining the FRS then the sale is accounted for outside the FRS.
I'm now very confused! I've never heard of having to include the sale in your Flat Rate turnover before and I can't find anything in the HMRC manuals to back it up, Notice 733 just says "Where you have reclaimed input tax on capital expenditure goods then, when they are eventually sold out of the business, you must account for output tax at the appropriate VAT rate for the sale (not at the flat rate)."
Anyone come across this before?
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My understanding is the same as yours.
It depends whether you reclaimed the input tax, which might be because you were outside the FRS at the time or in the scheme but the asset cost over £2000.
I agree with the answer above. HMRC Notice 733, paragraph 15.9 clearly says "Where you have reclaimed input tax on capital expenditure goods then, when they are eventually sold out of the business, you must account for output tax at the appropriate VAT rate for the sale (not at the flat rate)".
But it goes on to say "if you have not claimed input tax on capital items, either by choice or because it was not allowed, you must include the sale of those items in your flat-rate turnover" and then apply the FRS rate on the sales. In some cases, the tax payer withdraws from the scheme at the beginning of the VAT period in which the capital asset is sold if the VAT implications are significant.
I wonder if this is the last para is what the training provider was talking about.
